The United States private venture capital industry has entered a period of significant change and decline. The industry is rapidly becoming dramatically smaller and less able to foster the development of innovative, early stage businesses. The argument that these changes are just part of the normal business cycle is superficially appealing. In light of private venture capital’s importance to the U.S. economy, however, leaving the industry to self-adjust is not good economic policy.
Over the last 30 years, the private venture capital industry has been a primary driver for technology company creation, intellectual property commercialization and small business employment in the United States. Simultaneously, the federal government has played a strong role as a driver of basic research and intellectual property creation. The symbiotic relationship between the federal government’s encouraging invention and the private venture capital market’s financing of innovation has created new industries and commercialized a wide range of technologies.